Introduction
Today’s column concludes the mini-series discussion of the three texts, which I have indicated has had an immense influence in shaping my understanding of, and providing insights into, the rapidly evolving global energy dynamic. One of these texts is an official government report (International Energy Outlook, with Projections to 2050). Another has been authored by a long-term petroleum industry operative (The End to Fossil Fuel Insanity: Clearing the Air before Cleaning the Air by Terry Etam). And, the third has been written by one of the world’s most celebrated environmentalists (Apocalypse Never: Why Environmental Alarmism Hurts Us All by Michael Shellenberger).
For this purpose, I single out three major lessons for consideration. These are listed below in the order they are considered:
Lesson 1 – Circa 2050 likely inflection point for fossil fuels primacy in energy use
Lesson 2 – Alternatives to what obtain must better today’s Performance Indicators
Lesson 3 – Environmental alarmism feeds poverty & inequality and deters growth
Lesson 1
As indicated in my analysis of the US Energy Information Administration (EIA) Report, I came away from reading it feeling persuaded that on or around 2050, three decades from now, petroleum liquids are likely to lose their primacy as the leading source of energy supply in the global energy mix. This is not a case of projecting peak oil, a discredited activity. To the contrary, the Report predicts the steady growth in demand [0.6 percent per annum] for petroleum beyond 2050. Renewables [solar, wind, hydro, biomass] become the leading replacement source for energy supply in the global energy mix
As Etam has made very clear this transition is not a simple process of plug and play. Immense technical challenges have to be overcome if this substitution is to occur while global living standards continue to rise, at the minimum, along its current secular trajectory. It is apposite to note here that I have recommended two priorities for public spending of Guyana’s petroleum revenues; namely investment in renewables and cash transfers under the sobriquet of the Buxton Proposal. The second recommendation will be revisited starting in next week’s column.
As a final observation on this topic, going forward it is in Guyana’s best interest, if it were to build its optimal crude oil resource depletion rate within the window of opportunity offered by this sort of analysis. 2050 is not a drop-dead date. It is not a peak oil prediction date.
Lesson 2
In effect lesson 2, posits fairly, I believe that, critics of the ongoing operations of Guyana’s infant oil and gas sector should be constructive and offer policies and programmes that are reasoned and shown to be supported by: 1) their likely outcomes; 2) performance of key performance indicators, KPIs; and 3) their indicated modes and means of implementation and execution. I have followed this dictum in some detail for the two policy recommendations I have advanced thus far, and have cited in the previous section.
Readers should note that the KPIs for Guyana since its first oil are striking to say the least. While only a handful of nations worldwide have recorded a positive growth in real GDP per capita in 2020; and further, all nations in the Latin America and Caribbean, LAC, region have had negative growth in real GDP, due to its December 2019 first oil Guyana’s real GDP grew by 43.5 percent in 2020 and is projected to grow by 20.9 percent in 2021.
Government has had seven profit oil lifts since its first oil production date totaling about US$ 389 million; of which US$185 million was earned in 2020 and the remainder for the period up to July 3, 2021. This increase represents a rise in crude oil prices as well as an increase in the daily rate of production, DROP. If to this sum we add the one-time Signature bonus of US$18 million and estimated two percent royalty to date US$62 million we get just under a half a billion US dollars in revenues
Another KPI is spending by the oil companies on goods and services provided by local suppliers. There is much local controversy centring on the accuracy of the data put out by the oil companies. The figures have not been audited. These however reveal for 2019 a total of G$24.3 billion; for 2020 a total of G$31.9 billion; and for Q1 2021, G$8.5 billion. There are several other KPIs, like export earnings or share in national and foreign investments, but enough has been presented for one to be distrustful of flippant unconstructive disparagement.
Lesson 3
Within months of the publication of Shellenberger’s book the environmental newsletter Environmental Progress carried a 24-page news item, providing excerpts of 30 published reviews of the book in the international media entitled: Praise for Apocalypse Never. Oliver North is quoted as stating it was “The most powerful and influential book in living memory.” Tom Wigley, the climate scientist, posited: “This may be the most important book on the environment ever written.” With such pedigree, no one should be surprised at its impact on my thinking.
I have previously made it very clear that I completely reject purposeful and otherwise misrepresentations, deceptions, and fake news, which have been relentlessly hurled at Guyana’s emerging oil and gas sector. As readers are fully aware I had also previously categorized such activities as “noise and nonsense’. My hope is that this labeling is not interpreted as the trivialization of the impact of these actions. Indeed, to the contrary, since as was argued earlier, such activities, if left unaddressed can result in several negative outcomes for Guyana. These include: 1) distorting the economic outlook for all economic agents; 2) dis-incentivizing economic agents; 3) dampening investment spending; 4) undermining self-confidence; 5) eroding trust; and, 6) distracting from Guyana’s growing inequality and poverty.
Shellenberger’s book offers profound insights not least of which is his dismissive view of today’s sustainable development mantra translating into policies to sustain poverty. It is the reason why he urges strategies to stamp the human footprint on natural resources through greater intensity of use led by technology and innovation.
Conclusion
I’ll use the reflective mood in this evaluation of the three influential texts I have singled out for addressing to re-address or re-visit my oil for cash transfers programme known as the Buxton Proposal.
